Former caretaker minister for Commerce and Industries Dr Gohar Ejaz has said that the agreements with the independent power producers (IPPs) benefit the companies but the consumers face misery due to what he called “incompetence” of the government.
In a post on X (formerly Twitter) on Monday, Dr Ejaz said the government should only work as a policy maker and regulator as it is not competent to do business.
He said privatisation and other reforms are crucial to bring down electricity prices.
“Government is a policy maker and a regulator. It is not competent to do business and power sector is the true face of its incompetence and is forcing misery on all electric consumers of Pakistan by enforcing these IPP agreements for benefit of these 40 companies on 240 million people,” Ejaz wrote.
“The capacity charges of Rs2 trillion plus, which should actually be 8 per unit are being charged at Rs24 per unit due to non operations and over invoicing of these power plants being managed and half being operated by the government.
“They should all be privatised and all power sector to be operated as merchant plants and through electricity exchanges selling electricity at cheapest rates to privatised discos not at fixed capacity charges and pass through fuels. Electricity will cost less than half at Rs30 per unit against Rs60 per unit to all consumers domestic ,commercial and industry . We are all victims of Incompetence,” the former caretaker minister added.
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Dr Ejaz has earlier stated that the actual power tariff should be below Rs8 per unit but the government is charging Rs60 per unit due to flawed contracts with the IPPs.
“Why Rs2 trillion capacity payment paid to power plants last year which is costing all consumers Rs24 per unit when the actual cost should be below Rs8 per unit?
“Payments were made for idle capacity to IPP, they should be paid only for power produced and delivered to National Grid,” the former minister said.
He further said the contracts with IPPs are with conditions of “ Take or Pay “, which should be canceled.
“As per the contracts, the capacity payment charges are to be paid even if electricity is not produced by these IPPs, which is unsustainable. These electricity tariffs of Rs60 or 21 cents do not exist anywhere in the world.”
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The former minister was of the view that if electricity was bought from the cheapest electricity suppliers without any capacity payment and treated as merchant suppliers, electricity prices would come below Rs30 per unit instead of Rs60 per unit plus.
In another post on X, the minister said as per the National Electric Power Regulatory Authority’s (NEPRA) July 2023 order, fixed capacity payments were projected to be a total of Rs1.954 trillion in 2023-24 to all the power generators.
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